In this climate of shut downs and stay at home orders, an incredible number of renters have been forced to take advantage of the eviction moratoriums issued by the federal and state governments. Unfortunately, those moratoriums only delay the inevitable eviction if renters are not able to make up the payments missed within a fairly short time.  

A Bankruptcy Filing May Prevent Eviction (At Least Temporarily)

When a Chapter 7 bankruptcy case is filed, the person filing (the Debtor) immediately receives the benefit of the Automatic Stay.  This stay (also called an injunction) prevents landlords from starting or continuing an eviction action in court.  It also prohibits the landlord from trying to recover rent owed prior to the bankruptcy filing.  

However, there are limits to the benefits of the Automatic Stay.  The Automatic Stay will not prevent the landlord from forcing out the renter if the court entered a “judgment for possession” of the property after a hearing in court unless within 30 days of filing the bankruptcy, the debtor/renter pays all delinquent rent to the court and files a certification with the court that the amount paid to the court will cure all delinquent rent payments.    

Also, if the landlord has not obtained a judgment of possession of the property before the bankruptcy case is filed, and the rent payments are delinquent, the renter must be prepared to make an agreement with the landlord to bring payments current in order to avoid action by the landlord to obtain “relief” from the Automatic Stay to file or continue an eviction.

There are also special rules which apply to repeat bankruptcy filers.  We can provide the necessary information to avoid application of these special rules.

Use Bankruptcy To Catch Up on Past Due Rent

A Chapter 13 bankruptcy case can be used to obtain considerably more time to pay the past due rent.  Initially, of course, current rent payments must be made from the time of filing the Chapter 13 case.  The Chapter 13 debt adjustment plan then allows the renter to propose a reasonable time to bring all delinquent payments current.  Every case is determined by its own facts, so it is necessary to do a close analysis of all circumstances to determine if Chapter 13 is a viable alternative for renters.

What If You Want to Move Out

If the renter has no desire to remain in the rental unit after filing the bankruptcy case, a Chapter 7 bankruptcy case will allow the renter to move and will prevent the landlord from collecting any delinquent payments.